CAS Exam 9 Spring 2018, Question 11
Study guide: Exam 9
A specialty property insurer with a geographic footprint that has low correlation to the market's geographic footprint is considering issuing an insurance-linked security to reduce its exposure to hurricane risk.
Part a (1.5 points)
Identify two types of CAT bond triggers and briefly describe which one may be preferable from the perspective of the issuer and which one may be preferable from the perspective of the investor.
Part b (0.5 points)
Discuss two reasons why an Industry Loss Warranty may be preferable to a non-indemnity CAT bond for this insurer.
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